Small business confidence crashes to record low: survey

Only 21% of respondents expect their business to grow this year.

Small businesses in Hong Kong are on the brink as they register lowest confidence on record amidst the prolonged impact of the COVID-19 pandemic and a record economic contraction in 2020, according to a survey by professional accounting body CPA Australia.

The report, which saw the views of over 300 Hong Kong small businesses, found that only 16% of the respondents reported growth in 2020 and only 21% expect their business to grow this year.

CPA Australia noted that the weak outlook is reflected in the cautious approach of Hong Kong small businesses’ low intention of increasing their headcounts.

"For two consecutive years, expectations of business growth among Hong Kong small businesses have been the lowest of the surveyed markets," CPA Australia’s Greater China divisional president Janssen Chan said.

The report also found that 53% of the respondents identified COVID-19 as having a major impact on the business operations of small businesses in 2020, with 65% stating that they need at least a year to recover.

When asked what major actions small businesses took in response to COVID-19, they were most likely to have sought government support and subsidies (33%), reduced capital expenditure (32%), and reduced staff numbers or costs (22%).

Whilst most businesses began or increased focus on online sales as a response to the pandemic, only 17% of Hong Kong small businesses took action despite 57% stating that they received over 10% of their total sales through digital payment options.

"The issuing of electronic consumption vouchers, announced in the Hong Kong Budget, is an excellent opportunity for small businesses to take advantage of digital payment and e-commerce. In light of the overwhelming response to the Distance Business Programme, we suggest that the government consider reopening applications to the programme to continue driving the digitalisation and technology adoption of small businesses," Chan said.

Meanwhile the survey noted that Hong Kong small businesses are less inclined to innovate, with only 8.5% respondents stating they will introduce new products or services in 2021. Chan mentioned that having business innovations could enhance businesses’ long-term competitiveness and help them be up to par with other economies.

"Whilst business innovation may involve additional expenditure in the short term, small businesses in Hong Kong should be more proactive in reassessing their resource allocation and consider innovating through the adoption of technology," Chan said.